Internal migration and its impact on reducing inter-communal disparities in Chile

Based on the affirmation that internal migration in Chile has become increasingly less important as an equalizing mechanism for regional disparities, this paper aims to look at the causes of such immobility. The estimation procedure allows for obtaining a non-endogenous potential wage differential which controls for the selectivity process involved in the migration decision (based on observed and unobserved characteristics). This study finds that the productivity differential is the leading factor explaining migration. However, migration not only depends on individual characteristics, but strongly relies on the level of household education. Unfortunately, the initial disadvantages related to the household background determine that the one who faces attractive potential wage differentials is at the same time constrained by its household. The conclusion is that household-related migration costs are a source of inefficiency in labour allocation. Consequently, supporting the infrastructure in the rural economy is not the only way to achieve convergence across the territory. Subsidies aimed to reduce migration costs can be also considered in a framework oriented towards encouraging functional migration flows

Determinants of Student Achievements in the Primary Education of Paraguay

The idea that schooling scores depend on a combination of family background characteristics, ability and school (institutional) variables is quite clear. Regarding the issue of intergenerational transmission of inequality in the educational system, the most important question would be if and to what extent could a better institutional performance of the school service compensate for problems related to family background. By means of the estimation of a reduced form equation for selected scores, we investigate the impact of institutional performance on scores after controlling for family background and individual characteristics. We do this by using a novel data set and an OLS and quantile regression approach to analyze how heterogeneous the process of score generation can be. By providing integral health solutions, minimizing under-nutrition and providing ideal conditions in the classroom, training teachers can impact positively on low and mean learning outcomes, thus contributing to an improved educational quality and breaking cycles of intergenerational transmission of inequality. Increasing learning outcomes for levels above the median, only strengthens the transmission of inequality. Consequently, the equality approach should focus on trying to improve the worst scores and our results show that this can be reached at a significant level closing teacher training gaps, improving classroom conditions and improving health and nutrition.

Sectorial shifts and inequality: How to relate macroeconomic events to inequality changes

This paper presents a way to explore how macroeconomic shifts cause inequality changes. It is based on the backwardness observed in the agricultural sector in rural areas. It shows why highly dualistic economies tend to be more unequal than economies with flexible and integrated labour markets. Assuming that an inter-sectorial wage gap exists, this methodology allows control over the direct impact on inequality changes caused by macroeconomic changes that affects the relative competitiveness between the tradable and non-tradable sectors. The methodology aims to find the wage gap change (in log units) taking place between two points in time, which is not dependent on the distribution of endowments of the employed population (observed and unobserved characteristics). The decomposition methodology here proposed shows to be consistent under few assumptions (log normal distribution of earnings and inter-sectorial stochastic dominance) and was tested using real and simulated data. The procedure supports the conclusions by Devillanova et al. (2010) suggesting a channel through which trade integration can affect the wage inequality in a context of capital-skill complementarity and imperfect mobility of workers. The main conclusion of this paper is that duality is a source of inequality. Therefore, policies oriented to eliminate the systematic backwardness appear to be highly desirable in such economies

Economic Inequality in Latin America

Inequality in Latin America is very large and there is a great desire for greater social justice, inclusion and equal opportunities. In order to contribute to the understanding of such developments, this volume addresses the problem of economic inequality in Paraguay, Honduras and Chile. The studies show from different angles how an adverse family background has permanent negative effects on employment, wages and labour mobility, particularly in the presence of structural economic changes. In general, this book is a contribution to understand why inequality is highly persistent in Latin America, a place where low levels of income, poverty and vulnerability are likely to be passed on to the next generation

The dynamics of inequality change in a highly dualistic economy: Honduras, 1991-2007

We examine the drivers of inequality change in Honduras between 1991-2007, trying to understand why inequality increased in Honduras until 2005, while it was falling in most other Latin American countries. Using annual household surveys, we document first rising inequality between 1991-2005, which is followed by falling inequality thereafter. Using an inequality decomposition technique, we show that the rising inequality between 1991 and 2005 was, for the most part, driven by the dispersion of labour incomes in rural areas. We also show that the extraordinary labour earnings disequalization is mainly the result of a widening wage gap between the tradable and non-tradable sectors and occupations, combined with highly segmented labor markets and poor overall educational progress. The underlying determinants of the divergence between tradable and non-tradable sectors were highly overvalued currencies and poor commodity process for Honduras’ agricultural exports. Between 2005 and 2007, however, the inequality reduction was a result of equalizing trends in labour and non-labour incomes. The commodity boom promoting the tradable sector and remittances (in this order) played a significant role here, with government transfers playing a small supporting role. Since the decline in inequality is largely driven by international factors, we cannot be sure whether the decline in inequality will continue.Inequality, Decomposition, Education, Wages, Honduras, Migration

Determinants of student achievements in the primary education of Paraguay

The idea that schooling scores depend on a combination of family background characteristics, ability and school (institutional) variables is quite clear. Regarding the issue of intergenerational transmission of inequality in the educational system, the most important question would be if and to what extent could a better institutional performance of the school service compensate for problems related to family background. By means of the estimation of a reduced form equation for selected scores, we investigate the impact of institutional performance on scores after controlling for family background and individual characteristics. We do this by using a novel data set and an OLS and quantile regression approach to analyze how heterogeneous the process of score generation can be. By providing integral health solutions, minimizing under-nutrition and providing ideal conditions in the classroom, training teachers can impact positively on low and mean learning outcomes, thus contributing to an improved educational quality and breaking cycles of intergenerational transmission of inequality. Increasing learning outcomes for levels above the median, only strengthens the transmission of inequality. Consequently, the equality approach should focus on trying to improve the worst scores and our results show that this can be reached at a significant level closing teacher training gaps, improving classroom conditions and improving health and nutrition

Internal Migration and its Impact on Reducing Inter-communal Disparities in Chile

Abstract Based on the affirmation that internal migration in Chile has become increasingly less important as an equalizing mechanism for regional disparities, this paper aims to look at the causes of such immobility. This study finds that the productivity differential is the leading factor explaining migration. Unfortunately, the initial disadvantage due to a precarious family background determines that the one who faces attractive potential wage differentials is at the same time constrained (retained) by its household. The conclusion is that household-related migration costs are a source of inefficiency in labour allocation. The estimation procedure allows for obtaining a non-endogenous potential wage differential which controls for the selectivity process involved in the migration decision (based on observed and unobserved characteristics). Consequently, supporting the infrastructure in the rural economy is not the only way to achieve convergence across the territory. Subsidies aimed to reduce migration costs should be also considered in a framework oriented towards encouraging functional migration flows. JEL Classification: R23, J31, J6

The dynamics of inequality change in a highly dualistic economy: Honduras, 1991 - 2007

We examine the drivers of inequality change in Honduras between 1991-2007, trying to understand why inequality increased in Honduras until 2005, while it was falling in most other Latin American countries. Using annual household surveys, we document first rising inequality between 1991-2005, which is followed by falling inequality thereafter. Using an inequality decomposition technique, we show that the rising inequality between 1991 and 2005 was, for the most part, driven by the dispersion of labour incomes in rural areas. We also show that the extraordinary labour earnings disequalization is mainly the result of a widening wage gap between the tradable and non-tradable sectors and occupations, combined with highly segmented labour markets and poor overall educational progress. The underlying determinants of the divergencebetween tradable and non-tradable sectors were highly overvalued currencies and poor commodity process for Honduras' agricultural exports. Between 2005 and 2007, however, the inequality reduction was a result of equalizing trends in labour and non-labour incomes. The commodity boom promoting the tradable sector and remittances (in this order) played a significant role here, with government transfers playing a small supporting role. Since the decline in inequality is largely driven by international factors, we cannot be sure whether the decline in inequality will continue

Incidencia del fondo común municipal en el gasto municipal chileno

110 p.La presente investigación busca contribuir a la evidencia empírica sobre los efectos que las transferencias del Fondo Común Municipal (FCM) tiene sobre el gasto municipal per cápita chileno. En específico, se testea la existencia del efecto flypaper y su hipótesis de asimetría. Chile posee un grado considerable de descentralización respecto al gasto municipal, pero con fuerte centralización por el lado de la recaudación, creando una alta dependencia de las comunas a las transferencias intergubernamentales. En atención a esto, es importante indagar los efectos de las transferencias incondicionadas a nivel local, ya que encontrar evidencia del efecto flypaper sugeriría que dichos recursos incitan a los gobierno locales a expandir el gasto público muy por encima del socialmente óptimo, lo que a largo plazo podría traducirse en una situación fiscal insostenible, pero más preocupante, es que revelaría que las decisiones presupuestaria que toman los gobernantes municipales, así como las políticas públicas locales no estarían respondiendo a las necesidades y carencias de los habitantes, sino más bien a otro tipo de intereses como los políticos, siendo contraproducente para el bienestar de los habitantes y el desarrollo de las comunas. Para el análisis empírico, se utiliza una muestra de 300 comunas chilenas para el periodo 2009-2017, se construyó una base de datos de panel y se estimaron los modelos considerando efectos fijos. Los resultados revelan la presencia del efecto flypaper, indicando que el gasto municipal total per cápita es más sensible a los ingresos provenientes del FCM que a los provenientes de fuentes propias. Además, se evidencia un comportamiento asimétrico del tipo “reemplazo fiscal”. Por otra parte, se confirma que la pertenencia del alcalde a la misma coalición política del gobierno en turno y el ciclo económico son factores determinantes del gasto municipal chileno, caso contrario los niveles de pobreza monetaria y multidimensional y los indicadores de carencias, que no son elementos a considerar en la toma de decisiones sobre el gasto municipal chileno. // ABSTRACT: This research seeks to contribute to the empirical evidence on the effects that transfers from the Municipal Common Fund (FCM) have on chilean municipal spending per capita. Specifically, the existence of the flypaper effect and its hypothesis of asymmetry are tested. Chile has a considerable degree of decentralization with respect to municipal spending, but with strong centralization on the revenue side, creating a high dependence of the municipality on intergovernmental transfers. In view of this, it is important to investigate the effects of unconditional transfers at the local level, since finding evidence of the flypaper effect would suggest that these resources encourage local governments to expand public spending well above the socially optimal, which in the long run, could translate into an unsustainable fiscal situation, but more worryingly, it would reveal that the budgetary decisions made by municipal leaders, as well as local public policies, would not be responding to the needs and deficiencies of the inhabitants, but rather to other types of interests such as political ones, being counterproductive for the well-being of the inhabitants and the development of the municipalities. For the empirical analysis, a sample of 300 chilean municipalities are used for the period 2009 - 2017, a panel database was built and the models were estimated considering fixed effects. The results reveal the presence of the flypaper effect, indicating that the total municipal expenditure per capita is more sensitive to the revenues from the FCM than to those from its own sources. In addition, there is evidence of asymmetric behavior of the “fiscal replacement” type. On the other hand, it is confirmed that the mayor's membership of the same political coalition of the current government and the economic cycle are determining factors of chilean municipal spending, in contrary, the levels of monetary and multidimensional poverty and the deprivation indicators, which are not elements to consider when making decisions about Chilean municipal spending

Economic Inequality in Latin America: Migration, Education and Structural Change

Inequality in Latin America is very large and there is a great desire for greater social justice, inclusion and equal opportunities. In order to contribute to the understanding of such developments, this volume addresses the problem of economic inequality in Paraguay, Honduras and Chile. The studies show from different angles how an adverse family background has permanent negative effects on employment, wages and labour mobility, particularly in the presence of structural economic changes. In general, this book is a contribution to understand why inequality is highly persistent in Latin America, a place where low levels of income, poverty and vulnerability are likely to be passed on to the next generation